Such performances are falling into what R.J. DeSilva, spokesman for the comptroller, called a "gray area," where businesses may have been liable for the new fee on sexually oriented businesses since the beginning of the year. On Jan. 4, the comptroller published its enforcement guidelines for the fee: On p.65 of the latest 357-page edition of the Texas Register and described in the table of contents only as "Tax Administration 34 TAC §3.722," these are the rules that show taxpayers and tax collectors who must pay. As introduced under House Bill 1751 last session, the fee was only supposed to affect the state's 168 strip clubs. But these guidelines confirm the state may potentially collect from any venue that allows drinking and has performers with clothing not sufficiently opaque around the breasts, buttocks, or genitals, such as burlesques or experimental theatres.
The guidelines clarify collection and reporting methods but do little to reduce concerns over how broadly they could be applied. They give one specific example: If a bar held a wet T-shirt contest, the venue would be liable for the surcharge for that night. There wouldn't have to be nudity, just a see-through top. But before the rules were published, tax policy division manager Bryant Lomax was asked whether a theatrical or musical performance with nudity would be liable for the surcharge and said, "I have to say they would."
The rules would not apply in the case of a "wardrobe malfunction," and DeSilva said that, while he cannot cite specific examples, he believes there would be some businesses not covered. "In any tax issues, there are gray areas," he said. If a venue is unsure whether it would be liable, it should contact the tax policy division in advance. He encouraged public feedback during the 30-day consultation exercise, which ends Feb. 3, even though businesses may find that they've already been liable since Jan. 1. DeSilva did throw out one lifeline, however: A venue has to have both nudity and alcohol to pay up. So if you're showing nipples, close the bar, and make sure no one is packing a hip flask.
